Could Volatility Return to Stocks?
The time old question that all of us gambling on the stock market face -- will stocks keeping running or fall? If anything, a minor correction could be what's next and that means volatility will return.
Uncertainty has entered the market since Friday. A quick glance at the VXX shows that. This does not mean that trend will continue. Anyone who has dabbeled in the VXX knows this is a volatile trade in of itself. However the last time we had a "mini" pullback was at the start of August. That is when the VXX jumped close to 20% overnight. View the comparison in the S&P 500 and the VXX(click to view Google chart) in August, check out the massive spike. A similar jump could be in the works now as it did in August.
Below is the 5 day trend in the VXX, notice the increase since Friday:
Mastery believes volatility is making a comeback, case in point:
Volatility Update: Listen To The Little Guys? | Forbes.com
The stock market’s slow crawl to fresh records in recent sessions included a retreat for the CBOE Volatility Index (VIX). VIX, the market’s “fear gauge,” reflects expectations for future, short-term movement in the broad S&P 500. It’s been creeping higher in Q3, but moved back toward 52-week lows with last week’s 9% drop.
VIX is a popular snapshot of market sentiment, but its scope may be limited—especially now. Not all volatility measures are flashing the same cool market temperament. Take a look at small caps and emergingmarkets. Movement in their respective volatility indexes indicates that record highs in the S&P 500 and Dow Jones Industrial Average, as well as multi-year highs in the NASDAQ Composite, aren’t necessarily a reflection of what’s happening across the broader market at home and abroad. Continue..
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